SHANGHAI, May. 14 (SMM) – The US and European markets continued to absorb the comparatively weak Chinese economic figures last Friday, which indicated that China's economy may face great possibility to be dragged down by the European debt crisis. Besides, J.P. Morgan was reported to have suffered considerable losses since late March, while there was news that Greece would take another round of elections in June, causing risk aversion to grow. In consequence, LME copper extended weakness along with position closings and falling trading volumes, reaching a low at USD 7,966/mt. Nevertheless, the US announced the Michigan Consumer Sentiment Index hit a 4-year high in May at the tail of trading. This eased market sentiment somehow and led US equity markets to swing between gains and losses. LME copper finally ended at the USD 8,000/mt mark, a drop of nearly 1.5%.
The People's Bank of China (PBOC) announced May 12 to cut banks' reserve requirement ratio by 0.5 basis points from May 18, which can boost LME copper. However, unstable political situation in Greece will keep the euro fluctuating feebly and restrict LME copper to move higher. As such, SMM holds the view LME copper will continue to fluctuate following a high open, with prices expected between USD 8,050-8,150/mt during Monday's Asian trading session. Chinese stock markets will post strong performance following PBOC's move. SHFE copper prices thus will start slightly higher, but then meet selling pressures before hovering in a narrow band, while SHFE 1208 copper contract prices will lurch in the RMB 57,000-57,800/mt range. Spot copper premiums are estimated between positive RMB 20-100/mt versus SHFE 1205 copper contract.